Insurance policies are notoriously hard to understand. Many homeowners are surprised to find that their policies don’t actually cover their losses at exactly the moment when they need their insurance coverage the most.
Read on to find out about some of the tricky language and fine-print exclusions that can fool consumers who are trying to protect their homes.
Whether on the hurricane-prone Gulf of Mexico or in the swath of North Texas that belongs to Tornado Alley, Texas gets quite a bit of wind. And that means Texans need to make certain their policies cover wind damage.
According to the Texas Department of Insurance, most policies issued in the state cover windstorm, hurricane, and hail damage, unless you live in one of the 14 counties on the Texas coast or in the parts of Harris County that border Galveston Bay.
If you’re in one of those places, the Texas Windstorm Insurance Association (TWIA) can provide coverage, but there’s a catch in the fine print there, too: If you want to renovate or build on to your home, you must obtain a WPI-8 certificate of compliance. How do you do that? Get an inspection by a state windstorm inspector or an engineer licensed in the state of Texas while the home is under construction.
One last thing: Policies in 19 states, including Texas, have separate deductibles for windstorms and hurricanes, over and above the deductible on the rest of your policy. In Texas, homeowners will have to meet this separate deductible if they suffer wind or hail damage from windstorms of all kinds—not just named storms or hurricanes. These deductibles are typically higher than they are for other kinds of damage, meaning it pays to read the fine print and to comparison-shop.
Most homeowner policies do not cover flood damage. If you live in a flood-prone area (anyone in a flood plain or within a mile of lake, river, or ocean) you’ll have to buy a separate policy to protect your home from nasty weather. Most mortgage companies will require flood insurance if your home is in a flood zone under the FEMA flood maps. If you are unsure if you home is in a flood zone, you can go to FEMA’s website to look at the current flood maps.
But there are some things to know before you buy flood insurance. First, this insurance only covers damage up to $250,000, and it doesn’t extend to furnished basements, walkways, trees, pools, or decks. And for your truly valuable possessions—say artwork, antiques, or jewelry—you might only get limited coverage.
Most flood policies, including those offered through the National Flood Insurance Program,” will not pay for your damages if an appraiser determines they were caused by “earth movement”—even if a flood made the earth move in the first place! So, if a sinkhole opens up on your property, the hill behind your home collapses in a landslide, or your foundation cracks because the earth beneath it shifts, your insurance company may tell you you’re out of luck.
If you’re like most of us, the bathroom is a pretty important room in your house, and the sewer connection makes life a lot more pleasant. So you would think sewer mishaps would be covered in your homeowner policy, right? Wrong. Most homeowner policies don’t cover property damage due to sewer backups, so you’ll need to buy supplemental insurance to cover it.
But that’s exactly where things get tricky. Some policies cover property damage when items inside the house overflow or leak, including household appliances such as toilets and dishwashers, as well as plumbing, heating, or air conditioning systems. But these same policies may not cover damage from a sump pump that gets overwhelmed and allows the basement to flood during a heavy rainstorm. For that, you’d need a completely separate policy. It’s enough to make a homeowner’s head spin.
Finally, homeowners have to be careful to take out enough insurance to cover their needs. Many homeowners rely on their home’s assessed value, the amount of their mortgage, or the sale of comparable homes in the area to estimate how much coverage they need. But the real calculation they should make is how much it will cost to rebuild the home from scratch, including labor and materials. Many quotes that are given quickly over the phone rely on a formula that may not accurately reflect the replacement value of your specific home.